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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
RURBAN FINANCIAL CORP.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
RURBAN FINANCIAL CORP.
401 CLINTON STREET
DEFIANCE, OHIO 43512
(419) 783-8950
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
---------------------------
Defiance, Ohio
March 9, 2006
To the Shareholders of
Rurban Financial Corp.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders (the
"Annual Meeting") of Rurban Financial Corp. (the "Company") will be held at the
Eagles Club, 711 W. Second Street, Defiance, Ohio, on Thursday, April 20, 2006,
at 10:00 a.m., Eastern Daylight Savings Time, for the following purposes:
1. To elect four (4) directors to serve for terms of three (3)
years each.
2. To transact such other business as may properly come before
the Annual Meeting and any adjournment(s) thereof.
Shareholders of record at the close of business on February 23, 2006
are entitled to receive notice of, and to vote at, the Annual Meeting and any
adjournment(s) thereof in person or by proxy.
You are cordially invited to attend the Annual Meeting. Your vote is
important, regardless of the number of common shares you own. Whether or not you
plan to attend the Annual Meeting, please sign, date and return your proxy card
promptly in the enclosed envelope.
By Order of the Board of Directors,
/s/ Kenneth A. Joyce
Kenneth A. Joyce
President and Chief Executive Officer
RURBAN FINANCIAL CORP.
401 CLINTON STREET
DEFIANCE, OHIO 43512
(419) 783-8950
PROXY STATEMENT
This proxy statement and the accompanying proxy card are being mailed
to shareholders of Rurban Financial Corp. (the "Company") on or about March 9,
2006, in connection with the solicitation of proxies by the Board of Directors
of the Company for use at the Annual Meeting of Shareholders (the "Annual
Meeting") to be held on Thursday, April 20, 2006, or at any adjournment(s)
thereof. The Annual Meeting will be held at 10:00 a.m., Eastern Daylight Savings
Time, at the Eagles Club, 711 W. Second Street, Defiance, Ohio.
A proxy card for use at the Annual Meeting accompanies this proxy
statement. Whether or not you plan to attend the Annual Meeting, you may ensure
your representation by completing, signing, dating and promptly returning the
enclosed proxy card in the envelope provided. You may revoke your proxy at any
time before it is actually voted at the Annual Meeting (1) by giving written
notice of revocation to the Secretary of the Company at the address of the
Company shown on the cover page of this proxy statement; (2) by executing and
returning a later-dated proxy card which is received by the Company prior to the
Annual Meeting; or (3) by attending the Annual Meeting and giving notice of
revocation in person (but only if you are the registered owner of your common
shares). If your common shares are held in the name of your broker, financial
institution or other holder of record and you wish to revoke your proxy in
person, you must bring an account statement or letter from the broker, financial
institution or other holder of record indicating that you were the beneficial
owner of the common shares on February 23, 2006, the record date for voting (the
"Record Date"). ATTENDANCE AT THE ANNUAL MEETING WILL NOT, IN AND OF ITSELF,
CONSTITUTE REVOCATION OF A PROXY.
Only shareholders of the Company of record at the close of business on
the Record Date are entitled to receive notice of, and to vote at, the Annual
Meeting and any adjournment(s) thereof. At the close of business on the Record
Date, 5,027,433 common shares were outstanding and entitled to vote. Each common
share of the Company entitles the holder thereof to one vote on each matter to
be submitted to shareholders at the Annual Meeting. A quorum for the Annual
Meeting is a majority of the outstanding common shares in attendance at the
Annual Meeting in person or by proxy.
Shareholders holding common shares in "street name" with a broker,
financial institution or other holder of record may be eligible to appoint their
proxy electronically via the Internet or telephonically and may incur costs
associated with electronic access. Such shareholders should review the
information provided to them by their broker or other holder of record. This
information will describe the procedures to be followed in instructing the
holder of record how to vote the street name common shares and how to revoke
previously given instructions.
Common shares represented by properly executed proxy cards that are
returned to the Company prior to the Annual Meeting will be counted toward the
establishment of a quorum for the Annual Meeting even though they are marked
"Abstain," "Against," "Withhold Authority" or "For All Except" or not marked at
all. Brokers who hold their customers' common shares in street name may, under
the applicable rules of the exchange or other self-regulatory organizations of
which the brokers are members, sign and submit proxy cards for such common
shares and may vote such common shares on routine matters, such as the
uncontested election of directors. However, brokers who hold common shares in
street name may not vote such common shares on non-routine matters without
specific instructions from
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the customer who owns the common shares. Proxy cards that are signed and
submitted by brokers that have not been voted on certain matters as described in
the previous sentence are referred to as "broker non-votes." Broker non-votes
count toward the establishment of a quorum at the Annual Meeting.
The Company will bear the costs of preparing, printing and mailing this
proxy statement, the accompanying proxy card and any other related materials, as
well as all other costs incurred in connection with the solicitation of proxies
on behalf of the Company's Board of Directors other than the Internet and
telephone usage charges incurred if a shareholder appoints a proxy
electronically through a holder of record. Proxies will be solicited by mail and
may be further solicited, for no additional compensation, by officers, directors
or employees of the Company and its subsidiaries by further mailing, by
telephone or by personal contact. The Company will also pay the standard charges
and expenses of brokers, voting trustees, financial institutions and other
custodians, nominees and fiduciaries, who are record holders of common shares
not beneficially owned by them, for forwarding materials to and obtaining
proxies from the beneficial owners of common shares entitled to vote at the
Annual Meeting.
If you are a participant in the Employee Stock Ownership and Savings
Plan of Rurban Financial Corp. (the "Rurban ESOP and Savings Plan") and common
shares have been allocated to your account in the Rurban ESOP and Savings Plan,
you will be entitled to instruct the trustee of the Rurban ESOP and Savings Plan
how to vote those common shares and you may receive your voting instruction card
separately. If you do not provide voting instructions, the common shares
allocated to your account in the Rurban ESOP and Savings Plan will not be voted.
The Annual Report to the Shareholders of the Company for the fiscal
year ended December 31, 2005 (the "2005 fiscal year") is being delivered with
this proxy statement.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table furnishes information concerning the beneficial
ownership of common shares of the Company, as of the Record Date, by each person
known by the Company to own more than 5% of the outstanding common shares of the
Company, each current director, each person nominated for election as a
director, each executive officer named in the Summary Compensation Table, and
all current executive officers and directors of the Company as a group:
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Amount and Nature of Beneficial Ownership (1)
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Common Shares Which
Can Be Acquired Upon
Exercise of Options
Currently Exercisable
Name of Common Shares Becoming Exercisable Percent of
Beneficial Owner Presently Held Within 60 Days Total Class (2)
---------------- -------------- --------------------- ----- ---------
James E. Adams (3) 1,000 0 1,000 (4)
Thomas A. Buis 4,554 (5) 7,953 12,507 (4)
Thomas M. Callan 37,388 (6) 7,953 45,341 (4)
John R. Compo 43,978 (7) 10,709 54,687 1.09%
Robert W. Constien (3) 30,007 (8) 0 30,007 (4)
John Fahl 21,170 10,709 31,879 (4)
Robert A. Fawcett, Jr. 7,335 (9) 10,709 18,044 (4)
Richard L. Hardgrove 1,000 5,000 6,000 (4)
Kenneth A. Joyce (3) 16,961 (10) 53,519 70,480 1.40%
Rita A. Kissner 2,489 0 2,489 (4)
Thomas L. Sauer 4,348 (11) 0 4,348 (4)
Jeffrey D. Sewell (3) 2,472 9,589 12,061 (4)
Henry R. Thiemann (3) 5,775 (12) 19,077 24,852 (4)
Steven D. VanDemark 13,865 (13) 17,613 31,478 (4)
J. Michael Walz, D.D.S. 34,864 (14) 10,709 45,573 (4)
All executive officers and
directors as a group (15 persons) 201,353 (15) 168,334 369,687 7.35%
(1) Unless otherwise noted, the beneficial owner has sole voting and
investment power with respect to all of the common shares reflected in
the table. All fractional common shares have been rounded up to the
nearest whole common share. The mailing address of each of the current
executive officers and directors of the Company is 401 Clinton Street,
Defiance, Ohio 43512. The mailing address of the Trustee of the
Employee Stock Ownership and Savings Plan of Rurban Financial Corp. is
Reliance Financial Services, 401 Clinton Street, Defiance, Ohio 43512.
(2) The percent of class is based upon 5,027,433 common shares outstanding
on the Record Date and entitled to vote at the Annual Meeting, and the
number of common shares, if any, as to which the named person or group
has the right to acquire beneficial ownership upon the exercise of
options which are currently exercisable or will become exercisable
within 60 days after the Record Date.
(3) Individual named in the Summary Compensation Table. Mr. Adams resigned
as Executive Vice President and Chief Financial Officer of the Company
effective November 30, 2005. Mr. Sinn was promoted to Chief Financial
Officer of the Company effective December 1, 2005. Mr. Constien
resigned as Chairman, President and Chief Executive Officer of Reliance
Financial Services, N.A. ("RFS") effective January 3, 2006. Mr. Joyce
also serves as a director of the Company.
(4) Reflects ownership of less than 1% of the outstanding common shares of
the Company.
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(5) Includes 1,829 common shares held in the name of Mr. Buis' wife, as to
which she exercises sole voting and investment power.
(6) Includes 32,730 common shares held in a trust for the benefit of the
wife of Mr. Callan as to which he exercises shared voting and
investment power.
(7) Includes 2,756 common shares held jointly by Mr. Compo and his wife, as
to which he exercises shared voting and investment power.
(8) Includes 29,336 common shares held for the account of Mr. Constien in
the Rurban ESOP and Savings Plan.
(9) Includes 6,198 common shares held by the Robert A. Fawcett Jr. Trust as
to which Mr. Fawcett has sole voting and investment power.
(10) Includes 100 common shares held in the name of Mr. Joyce's son for
which Mr. Joyce is custodian; and 5,231 common shares held for the
account of Mr. Joyce in the Rurban ESOP and Savings Plan.
(11) Includes 2,604 shares held jointly by Mr. Sauer and City Beverage as to
which Mr. Sauer exercises sole voting and investment power, and 1,744
shares held jointly by Mr. Sauer and his wife as to which Mr. Sauer
exercises shared voting and investment power.
(12) Includes 601 common shares held jointly by Mr. Thiemann and his wife,
as to which he exercises shared voting and investment power; and 3,601
common shares held for the account of Mr. Thiemann in the Rurban ESOP
and Savings Plan.
(13) Includes 4,390 common shares held jointly by Mr. VanDemark and his
wife, as to which he exercises shared voting and investment power. Also
includes 4,132 common shares held in the names of Mr. VanDemark's
children for which Mr. VanDemark is custodian.
(14) Includes 737 common shares held by Dr. Walz and his spouse as to which
Dr. Walz exercises shared voting and investment power.
(15) See Notes (5) through (14) above. Excludes common shares held by
Messrs. Adams and Constien as they resigned prior to the Record Date.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the Company's knowledge, based solely on a review of the reports
furnished to the Company and written representations that no other reports were
required during the 2005 fiscal year, all filing requirements applicable to
officers, directors and owners of more than 10% of the outstanding common shares
of the Company under Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), were complied with.
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ELECTION OF DIRECTORS
There are currently eleven individuals serving as members of the Board
of Directors - four in the class whose terms expire at the Annual Meeting, three
in the class whose terms expire in 2007 and four in the class whose terms expire
in 2008. On June 16, 2005, upon the recommendation of the Governance and
Nominating Committee, Thomas L. Sauer was elected as a director of the Company
to fill the vacancy created by the retirement of Eric C. Hench effective June
15, 2005. Mr. Sauer was recommended to the Governance and Nominating Committee
by the directors and executive officers of the Company. Mr. Sauer has served as
a director of The State Bank and Trust Company ("State Bank") since August 2004.
The Board of Directors has reviewed, considered and discussed each
director's relationships, both direct or indirect, with the Company and its
subsidiaries and the compensation and other payments, if any, each director has,
both directly or indirectly, received from or made to the Company and its
subsidiaries in order to determine whether such director qualifies as
independent under Rule 4200(a)(15) of the Marketplace Rules of The Nasdaq Stock
Market, Inc. ("Nasdaq"). The Board of Directors has determined that the Board of
Directors has at least a majority of independent directors, and that each of the
following directors has no financial or personal ties, either directly or
indirectly, with the Company or its subsidiaries (other than compensation as a
director of the Company and its subsidiaries, banking relationships in the
ordinary course of business with the Company's banking subsidiaries and
ownership of the Company's common shares as described in this proxy statement)
and thus qualifies as independent under Nasdaq Marketplace Rule 4200(a)(15):
Thomas A. Buis, Thomas M. Callan, John R. Compo, John Fahl, Robert A. Fawcett,
Jr., Richard L. Hardgrove, Rita A. Kissner, Thomas L. Sauer, Steven D. VanDemark
and J. Michael Walz, D.D.S.
The Board of Directors proposes that each of the four nominees
identified below be elected for a new term of three years. Each nominee was
recommended to the Board of Directors by the Governance and Nominating
Committee. Each individual elected as a director at the Annual Meeting will hold
office for a term of three years and until his or her successor is elected and
qualified, or until his or her earlier resignation, removal from office or
death. Common shares represented by properly executed and returned proxy cards
will be voted FOR the election of the Board of Directors' nominees unless
authority to vote for one or more nominees is withheld. If a nominee who would
otherwise receive the required number of votes becomes unavailable or unable to
serve as a director, the individuals designated as proxy holders reserve full
discretion to vote the common shares represented by the proxies they hold for
the election of the remaining nominees and for the election of any substitute
nominee designated by the Board of Directors. The Board of Directors has no
reason to believe that any of the nominees named below will not serve if
elected.
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The following table gives certain information, as of the Record Date,
concerning each nominee for election as a director of the Company. Unless
otherwise indicated, each person has held his or her principal occupation for
more than five years.
Director of the
Position(s) Held with the Company Nominee
Company and its Subsidiaries Continuously for Term
Nominee Age and Principal Occupation(s) Since Expiring In
------- --- ---------------------------------- --------------- -----------
Thomas A. Buis 69 Consultant, Blanchard Valley Health 2001 2009
Association, Findlay, Ohio, a
non-profit parent corporation of an
integrated regional health system,
since 2004; retired as President
and Chairman in 2004; served as
Chairman from 2000 to 2004 and
President from 1975 to 2000 of
Spencer-Patterson Agency, Inc.,
Findlay, Ohio, an insurance
agency. Director of State Bank
since 2004. Director of RFS from
2003 to July 2005.
Kenneth A. Joyce 57 President and Chief Executive 2002 2009
Officer of the Company since August
2002; Chairman and Chief Executive
Officer of Rurbanc Data Services,
Inc., ("RDSI") since October 1997;
Director of State Bank since 2002;
Director of RFCBC, Inc. ("RFCBC")
since 2004; Director of RDSI since
1997; Director of The Exchange Bank
since January 2006.
Thomas L. Sauer 58 President and Owner of City June 2005 2009
Beverage, a beer distributor;
Director of State Bank since August
2004.
J. Michael Walz, D.D.S. 62 General Dentist of Defiance Dental 1992 2009
Group in Defiance, Ohio since 1970;
Director of State Bank since 1989;
Director of RFCBC since 2004;
Director of RFS from 1997-2005;
Director and Chairman of The
Exchange Bank since January 2006.
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The following table gives certain information, as of the Record Date,
concerning the current directors whose terms will continue after the Annual
Meeting. Unless otherwise indicated, each person has held his principal
occupation for more than five years.
Director of the
Position(s) Held with the Company Term
Company and its Subsidiaries Continuously Expires
Name Age and Principal Occupation(s) Since In
---- --- ------------------------------- --------------- ------------
Thomas M. Callan 63 (Retired) President and Owner of 2001 2007
Defiance Stamping Company, Defiance
Ohio, a metal stamping company, from
1980 to April 2005; Director of State
Bank since 1996.
Richard L. Hardgrove 66 (Retired) President and Chief 2004 2007
Executive Officer of the Eastern
Region of Sky Bank, Salineville, Ohio
from 1998 to 2001; Director of State
Bank since 2004.
Steven D. VanDemark 53 General Manager of Defiance Publishing 1991 2007
Company, Defiance, Ohio, a newspaper
publisher, since 1985; Chairman of
the Board of the Company since 1992;
Director of State Bank since 1990;
Chairman of the Board of State Bank
since 1992; Director of RDSI since
1997; Director of RFCBC since 2004.
John R. Compo 61 Chairman of Board and President of 1987 2008
Compo Corporation, Defiance, Ohio, an
industrial property management and
logistical warehousing company, since
1984; Director of State Bank since
1985.
John Fahl 69 (Retired) President from 1994 to 2001 1996 2008
of Tire Operations, and Director from
1992 to 2001, of Cooper Tire & Rubber
Company, Findlay, Ohio, a tire and
rubber manufacturer; Director of
Lehigh Technologies, LLC, a
manufacturer of rubber powders, since
2004; Director of State Bank since
2004; Chairman of the Board and
Director of RFCBC since 2004.
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Director of the
Position(s) Held with the Company Term
Company and its Subsidiaries Continuously Expires
Name Age and Principal Occupation(s) Since In
---- --- ------------------------------- --------------- ------------
Robert A. Fawcett, Jr. 64 Insurance Agent, Fawcett, Lammon, 1992 2008
Recker and Associates Insurance
Agency, Inc., Ottawa, Ohio, since
1998; Director of State Bank since
2004; Director RFCBC from 2001 to
2004.
Rita A. Kissner 60 (Retired) Mayor of City of Defiance, 2004 2008
Ohio from 1992 to 2000; Director of
State Bank since 2004.
There are no family relationships among any of the directors, nominees
for election as directors and executive officers of the Company.
RECOMMENDATION AND VOTE
Under Ohio law and the Company's Code of Regulations (as amended), the
four nominees receiving the greatest number of votes will be elected.
Common shares represented by properly executed and returned proxy cards
will be voted FOR the election of the Board of Directors' nominees named above
unless authority to vote for one or more nominees is withheld. Shareholders may
withhold authority to vote for the entire slate as nominated or, by writing the
name of one or more nominees on the line provided on the proxy card, withhold
the authority to vote for one or more nominees. Common shares as to which the
authority to vote is withheld and broker non-votes will be counted for quorum
purposes, but will not be counted toward the election of directors or toward the
election of the individual nominees specified on the proxy card.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
NOMINEES NAMED ABOVE.
MEETINGS OF AND COMMUNICATIONS WITH THE BOARD OF DIRECTORS
The Board of Directors of the Company held a total of fourteen meetings
during the 2005 fiscal year. Each incumbent director attended 75% or more of the
aggregate of the number of meetings held by the Board of Directors and the
number of meetings held by the Board committees on which he or she served. In
accordance with the Nasdaq Marketplace Rules, the independent directors meet in
executive session as appropriate matters for their consideration arise.
The Company encourages all incumbent directors and director nominees to
attend each annual meeting of shareholders. All of the incumbent directors and
director nominees attended the Company's last annual meeting of shareholders
held on April 21, 2005.
Shareholders may initiate communication to the Board either generally
or in care of Valda Colbart, the Company's Investor Relations Officer, or
another corporate officer. There is no screening process, and all shareholder
communications that are received by officers for the Board's attention are
forwarded to the Board.
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Any communication to the Board may be mailed to the Board, in care of
Valda Colbart, the Company's Investor Relations Officer, at the Company's
headquarters, 401 Clinton Street, Defiance, Ohio 43512. The mailing envelope
must contain a clear notation indicating that the enclosed letter is a
"Shareholder-Board Communication" or "Shareholder-Director Communication." In
addition, communication via the Company's website at www.rurbanfinancial.net may
be used. All such communications, whether via mail or the website, must identify
the author as a shareholder and clearly state whether the intended recipients
are all members of the Board or just certain specified individual directors. The
Investor Relations Officer will make copies of all such communications and
circulate them to the appropriate director or directors without any screening.
COMMITTEES OF THE BOARD
The Board of Directors has five standing committees: the
Executive-Compliance Committee, the Compensation Committee, the Audit Committee,
the Loan Review Committee, and the Governance and Nominating Committee.
Executive-Compliance Committee
The Board of Directors of the Company has an Executive-Compliance
Committee comprised of John R. Compo, Robert A. Fawcett, Jr., Kenneth A. Joyce,
Rita A. Kissner, Steven D. VanDemark (Chair), and J. Michael Walz, D.D.S. Eric
C. Hench was a member of the Executive-Compliance Committee until his retirement
in June 2005. The Governance and Nominating Committee of the Company appointed
Rita A. Kissner to the Executive-Compliance Committee in August 2005. The
function of the Executive-Compliance Committee is to act on behalf of the Board
of Directors between regularly scheduled meetings of the Board of Directors and
to monitor corporate compliance with applicable laws and regulations. The
Executive-Compliance Committee met three times during the 2005 fiscal year.
Compensation Committee
The Board of Directors of the Company has a Compensation Committee
comprised of John R. Compo, John Fahl (Chair), Steven D. VanDemark and J.
Michael Walz, D.D.S. Eric C. Hench was a member of the Compensation Committee
until his retirement in June 2005. The Board of Directors has determined that
each member of the Compensation Committee qualifies as independent under Rule
4200(a)(15) of the Nasdaq Marketplace Rules. In addition, each member of the
Compensation Committee qualifies as an "outside director" for purposes of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), and as a "non-employee director" for purposes of Section 16b-3
under the Exchange Act.
The function of the Compensation Committee is to review and recommend
to the Board of Directors of the Company the salary, bonus and other cash
compensation to be paid to, and the other benefits to be received by, the
Company's executive officers, including the President and Chief Executive
Officer. The Compensation Committee also evaluates and makes recommendations
regarding the compensation of the directors, including their compensation for
services on Board committees. The Compensation Committee also administers the
Rurban Financial Corp. Stock Option Plan. The Compensation Committee met twice
during the 2005 fiscal year. The report of the Compensation Committee on
executive compensation begins on page 15.
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Audit Committee
The Board of Directors of the Company has an Audit Committee comprised
of Thomas M. Callan, Robert A. Fawcett, Jr. (Chair), Richard L. Hardgrove and
Rita A. Kissner (since January 19, 2005). The Board of Directors has determined
that each member of the Audit Committee qualifies as independent under Nasdaq
Marketplace Rules 4200(a)(15) and 4350(d)(2) as well as under Rule 10A-3
promulgated under the Exchange Act. The Audit Committee met eight times during
the 2005 fiscal year.
The Board of Directors has determined that each member of the Audit
Committee is able to read and understand financial statements, including the
Company's balance sheet, income statement and cash flow statement, and is
qualified to discharge his or her duties to the Company and its subsidiaries. In
addition, the Board of Directors has determined that Richard L. Hardgrove
qualifies as an "audit committee financial expert" for purposes of Item 401(h)
of Regulation S-K promulgated by the Securities and Exchange Commission ("SEC")
by virtue of his service as the President and Chief Executive Officer of Sky
Bank prior to his retirement.
The Audit Committee is organized and conducts its business pursuant to
a written charter adopted by the Board of Directors. At least annually, the
Audit Committee reviews and reassesses the adequacy of its charter and
recommends changes to the full Board of Directors as necessary. The purpose of
the Audit Committee is to assist the Board of Directors in its oversight of:
- the accounting and financial reporting principles and policies
and the internal accounting and disclosure controls and
procedures of the Company and its subsidiaries;
- the Company's internal audit function;
- the certification of the Company's quarterly and annual
financial statements and disclosures; and
- the Company's consolidated financial statements and the
independent audit thereof.
The Audit Committee is also directly responsible for the appointment,
compensation, retention and oversight of the work of the independent registered
public accounting firm engaged for the purpose of preparing or issuing an audit
report or performing other audit, review or attestation services. The
independent registered public accounting firm reports directly to the Audit
Committee. The Audit Committee evaluates the independence of the independent
registered public accounting firm on an ongoing basis. Additionally, the Audit
Committee reviews and pre-approves all audit services and permitted non-audit
services provided by the independent registered public accounting firm to the
Company or any of its subsidiaries and ensures that the independent registered
public accounting firm is not engaged to perform the specific non-audit services
prohibited by law, rule or regulation. The Audit Committee is also responsible
for establishing procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
controls or auditing matters, including the confidential, anonymous submission
by employees of the Company of concerns regarding questionable accounting or
auditing matters. The Audit Committee's report relating to the 2005 fiscal year
begins at page 35.
Loan Review Committee
The Board of Directors of the Company has a Loan Review Committee
comprised of Thomas A. Buis, Thomas M. Callan (Chair) and Thomas L. Sauer (since
June 15, 2005). The function of the Loan Review Committee is to assist the Board
of Directors in fulfilling its oversight responsibilities of credit
10
quality in the subsidiary banks. The Loan Review Committee is comprised of
independent directors who are not involved in the loan approval process at
subsidiary banks. The Loan Review Committee has an established charter and met
nine times during the 2005 fiscal year.
Governance and Nominating Committee
The Board of Directors of the Company has a Governance and Nominating
Committee comprised of Thomas A. Buis (Chair), Robert A. Fawcett, Jr., Steven D.
VanDemark and J. Michael Walz, D.D.S. The Board of Directors has determined that
each member of the Governance and Nominating Committee qualifies as independent
under Nasdaq Marketplace Rule 4200(a)(15). The function of the Governance and
Nominating Committee is to assist the Board of Directors in identifying
qualified individuals to become directors of the Company and its subsidiaries,
determining the composition of the boards of directors and their committees,
monitoring a process to assess the effectiveness of the boards of directors and
developing and implementing the Company's corporate governance guidelines. The
Governance and Nominating Committee also evaluates the performance of the
current members of the Company's Board of Directors on an annual basis. The
Governance and Nominating Committee met twice during the 2005 fiscal year. The
charter of the Governance and Nominating Committee is posted on the Company's
website at www.rurbanfinancial.net.
NOMINATING PROCEDURES
As described above, the Company has a standing Governance and
Nominating Committee that has the responsibility to identify and recommend
individuals qualified to become directors. The Governance and Nominating
Committee selected the nominees for re-election as directors at the Company's
Annual Meeting. When considering potential candidates for the Board of
Directors, the Governance and Nominating Committee strives to assure that the
composition of the Board of Directors, as well as its practices and operation,
contribute to value creation and to the effective representation of the
Company's shareholders. The Governance and Nominating Committee will consider
those factors it deems appropriate in evaluating director candidates, including
judgment, skill, strength of character and experience. Depending upon the
current needs of the Board of Directors, certain factors may be weighed more or
less heavily by the Governance and Nominating Committee.
In considering candidates for the Board of Directors, the Governance
and Nominating Committee evaluates the entirety of each candidate's credentials
and does not have any specific minimum qualifications that must be met by a
nominee. However, the Governance and Nominating Committee strives to select
candidates who have the highest personal and professional integrity; who have
demonstrated exceptional ability and judgment; who shall be most effective, in
conjunction with the other members of the Board, in serving the long-term
interests of the Company's shareholders; who can devote the necessary time to
serve as a director; and who have a working knowledge of financial statements
and a sense of proper corporate governance. In addition, no person who is 70
years old or older will be eligible to be elected or re-elected to the Board of
Directors.
The Governance and Nominating Committee considers candidates for the
Board of Directors from any reasonable source, including shareholder
recommendations. The Governance and Nominating Committee does not evaluate
candidates differently based on who has made the recommendation. The Governance
and Nominating Committee has the authority under its charter to hire and pay a
fee to consultants or search firms to assist in the process of identifying and
evaluating candidates. No such consultants or search firms have been used to
date and, accordingly, no fees have been paid to consultants or search firms.
11
Shareholders may recommend director candidates for consideration by the
Governance and Nominating Committee by writing to Steven D. VanDemark, Chairman
of the Board of the Company, Thomas A. Buis, Chairman of the Governance and
Nominating Committee, Kenneth A. Joyce, President and Chief Executive Officer of
the Company, or Valda Colbart, the Company's Investor Relations Officer. To be
considered, recommendations must be received at the Company's principal office
located at 401 Clinton Street, Defiance, Ohio 43512 no later than June 30 of the
year preceding the annual meeting of shareholders and must state the
qualifications of the proposed candidate.
Shareholders who wish to nominate an individual for election as a
director at an annual meeting of shareholders of the Company must comply with
the Company's Code of Regulations regarding shareholder nominations. All
shareholder nominations must be made in writing and delivered or mailed (by
first class mail, postage prepaid) to the Secretary of the Company at the
Company's principal office located at 401 Clinton Street, Defiance, Ohio 43512.
Nominations for an annual meeting of shareholders must be received by the
Secretary of the Company on or before the later of (a) the February 1st
immediately preceding the date of the annual meeting of shareholders or (b) the
60th day prior to the first anniversary of the most recent annual meeting of
shareholders at which directors were elected. However, if the annual meeting of
shareholders is not held on or before the 31st day next following the first
anniversary of the most recent annual meeting of shareholders at which directors
were elected, nominations must be received by the Secretary of the Company
within a reasonable time prior to the date of the annual meeting of
shareholders. Nominations for a special meeting of shareholders at which
directors are to be elected must be received by the Secretary of the Company no
later than the close of business on the 7th day following the day on which the
notice of the special meeting was mailed to shareholders. In any event, each
nomination must contain the following information: (a) the name, age, business
address and residence address of each proposed nominee; (b) the principal
occupation or employment of each proposed nominee; (c) the number of common
shares owned beneficially and of record by each proposed nominee and the length
of time the proposed nominee has owned such shares; and (d) any other
information required to be disclosed with respect to a nominee for election as a
director under the proxy rules promulgated under the Exchange Act. Nominations
not made in accordance with the Company's Code of Regulations will not be
considered.
CODE OF CONDUCT
In accordance with the applicable sections of the Nasdaq Marketplace
Rules and rules of the SEC, the Board of Directors has adopted the Rurban
Financial Corp. Code of Conduct and Ethics which applies to the directors,
officers and employees of the Company and its subsidiaries. The Code of Conduct
and Ethics is posted on the "Corporate Governance" page of the Company's website
at www.rurbanfinancial.net.
DIRECTORS' COMPENSATION
Each director of the Company who is not an employee of the Company or
one of its subsidiaries (a "non-employee director") currently receives an annual
cash retainer in the amount of $9,000 paid in twelve monthly installments of
$750. The Chairman of the Board of Directors of the Company (Steven D.
VanDemark) receives an additional annual cash retainer of $12,000 paid in twelve
monthly installments of $1,000. Each non-employee director also receives an
annual cash retainer of $1,000 (increased from $500 in 2005) for each committee
of the Board of Directors on which he or she serves, except and the member of
the Audit Committee designated as the "audit committee financial expert"
(Richard L. Hardgrove) receives an annual cash retainer of $4,000 (increased
from $3,500 in 2005). Each non-employee director also receives an additional
$250 (increased from $100 in 2005) for each Board of Director meeting attended
and
12
$250 for each meeting of a committee of the Board of Directors attended. In
2005, only members of the Executive-Compliance Committee received $250 for each
committee meeting attended.
Each non-employee director of the Company also serves on the board of
directors of one or more of the Company's subsidiaries, and receives an annual
cash retainer for such service as well as fees for attendance at meetings of the
board of directors of the appropriate Company subsidiary (and committees of that
board).
The following table summarizes the aggregate amount of fees paid in
cash to each incumbent non-employee director of the Company for service on the
Board of Directors of the Company (and committees of the Company board) and for
service in the board of directors of a subsidiary of the Company (and committees
of that board) during the 2005 fiscal year:
Aggregate
Company Aggregate
Name Board of Director Subsidiary TOTAL
---- Fees Fees FEES PAID
------------------- ---------- ---------
Thomas A. Buis $14,750 $11,750 $26,500
Thomas M. Callan $15,450 $ 8,200 $23,650
John R. Compo $13,950 $10,300 $24,250
John Fahl $12,200 $21,025 $33,225
Robert A. Fawcett, Jr. $16,300 $10,975 $27,275
Richard L. Hardgrove $ 6,250 $ 7,800 $24,050
Rita A. Kissner $13,700 $10,525 $24,225
Thomas L. Sauer $ 7,500 $12,100 $19,600
Steven D. VanDemark $26,800 $18,325 $45,125
J. Michael Walz, D.D.S. $16,950 $18,400 $35,350
From time to time, non-employee directors of the Company also receive
options to purchase common shares of the Company. These options are awarded
under the Rurban Financial Corp. Stock Option Plan at the discretion of the
Compensation Committee. There were no options awarded to non-employee directors
of the Company during 2005. Messrs. Joyce, Adams, Constien, and Thiemann
received options during the 2005 fiscal year as described under "COMPENSATION OF
EXECUTIVE OFFICERS--GRANTS OF OPTIONS."
RURBAN FINANCIAL CORP. PLAN TO ALLOW DIRECTORS TO ELECT TO DEFER COMPENSATION
On March 12, 1997, the Board of Directors of the Company adopted the
Rurban Financial Corp. Plan to Allow Directors to Elect to Defer Compensation
(the "Deferred Compensation Plan"). The purpose of the Deferred Compensation
Plan is to advance the interests of the Company and its shareholders by allowing
the directors of the Company and/or its subsidiaries an opportunity to elect to
defer payment of all or a portion of their compensation received for their
services as directors.
The Plan is administered by the Board of Directors of the Company.
Subject to the express provisions of the Plan, the Board has sole discretion and
authority to determine from time to time the individuals that are eligible to
participate in the Plan.
Each director of the Company and its subsidiaries is eligible to
participate in the Plan by electing to defer the receipt of all or a portion of
the compensation to be received by such director or otherwise payable to him
during any calendar year. At the time that a director first elects to defer
compensation,
13
the Company will establish an account ("Account") in such director's name to
which all of the director's deferred compensation will be credited. At the end
of each calendar year, the directors' Account will be credited with an amount of
interest equal to the rate determined by the Board of Directors for such year.
In the event that a director's service to the Company or any of it
subsidiaries is terminated for any reason, the director will be entitled to
receive a distribution (a "Distribution") from the Company for the amount of
deferred compensation and accrued interest then credited to such director's
Account. A Distribution to a director for the amount credited to such director's
Account may be made in cash either in a lump sum or in approximately equal
annual installments over a period of ten years. Each director will be allowed to
suggest his/her preferred method of Distribution; however, the Board shall have
the ultimate discretion in determining the actual method of Distribution.
Directors who receive a Distribution from the Plan in installment payments,
shall, each year, earn interest on any undistributed amounts credited to such
director's Account as of the last day of each calendar year at a rate equal to
the prime rate offered by the Company on the first day of that year.
Any Distribution received by a director under the Plan will be treated
as ordinary income for federal income tax purposes at the time that such
director received the Distribution.
The Board of Directors may amend or terminate the Plan at any time,
without the consent of any director of the Company or its subsidiaries.
To date, no director of the Company or its subsidiaries has opted to
participate in the Plan.
OTHER DIRECTOR BENEFITS
Additional life insurance is provided to certain officers and directors
of the Company through a bank-owned life insurance policy ("BOLI"). In 2004,
State Bank purchased an $8 million BOLI. By way of a separate split-dollar
agreement, the BOLI policy interests are divided between State Bank and the
insured's beneficiary. State Bank owns the policy cash value and a portion of
the policy net death benefit, over and above the cash value assigned to the
insured's beneficiary. The cash surrender value of these life insurance policies
totaled approximately $8,524,234 at December 31, 2005. Thomas A. Buis and John
Fahl have $50,000 coverage and Thomas M. Callan, John R. Compo, Robert A.
Fawcett, Jr., Steven D. VanDemark and J. Michael Walz each have coverage of
$100,000.
Directors are also entitled to receive reimbursement for all reasonable
expenses incurred while serving in the capacity as a director of the Company or
its subsidiaries. Reimbursement includes, but is not limited to, expenses
incurred for continuing education (i.e. travel, lodging, meals, etc.).
TRANSACTIONS INVOLVING MANAGEMENT
During the 2005 fiscal year, executive officers and directors of the
Company (including certain executive officers of the Company's subsidiaries),
members of their immediate families and corporations or organizations with which
they are affiliated entered into banking transactions with the Company's
subsidiaries (State Bank, The Exchange Bank) in the ordinary course of their
respective businesses and in compliance with applicable federal and state laws
and regulations. It is expected that similar transactions will be entered into
in the future. Loans to such persons have been made on substantially the same
terms, including the interest rate charged and collateral required, as those
prevailing at the time for comparable transactions with persons not affiliated
with the Company or its subsidiaries and all such loans comply
14
with Regulation O of the federal banking laws and comparable laws of the State
of Ohio. These loans have been, and are presently, subject to no more than a
normal risk of uncollectibility and present no other unfavorable features. The
amount of loans to directors and executive officers of the Company (including
certain executive officers of the Company's subsidiaries) and their associates
as a group at December 31, 2005, was $3,589,390, including undrawn lines of
credit. As of the date hereof, all of such loans were performing loans.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Kenneth A. Joyce and James E. Adams received compensation from the
Company for services rendered during the 2005 fiscal year in their capacities as
executive officers of the Company and one or more of its subsidiaries. Henry R.
Thiemann received compensation from State Bank and the Company for services
rendered during the 2005 fiscal year in his capacity as an executive officer of
State Bank and the Company. Robert W. Constien and Jeffrey D. Sewell received
compensation from State Bank and/or RFS for services rendered during the 2005
fiscal year in their capacities as executive officers of State Bank and/or RFS.
Duane L. Sinn received compensation from State Bank for services rendered during
the 2005 fiscal year in his capacity as a senior officer of State Bank. Mr. Sinn
was named Chief Financial Officer of the Company effective December 1, 2005. Mr.
Adams resigned as Chief Financial Officer of the Company effective November 30,
2005.
The Compensation Committee is comprised of four independent directors.
The Compensation Committee reviews and recommends to the full Board of Directors
the salaries, bonuses and other cash compensation to be paid to, and the other
benefits to be received by, the executive officers of the Company. The
Compensation Committee has developed, implemented and maintains an executive
compensation program that supports the overall objectives and performance of the
Company and provides compensation levels that enable the organization to
attract, retain and reward competent executive officers.
Compensation Policies Toward Executive Officers
In determining the compensation of the executive officers of the
Company, the Compensation Committee has sought to create a compensation program
which is competitive with programs of a peer group of similar organizations and
that links compensation to financial performance, rewards above-average
corporate performance and recognizes individual contributions and achievements.
There are two components of the annual cash compensation program for the
executive officers of the Company: (1) a base salary component; and (2) an
incentive bonus component payable under the Rurban Financial Corp. Incentive
Compensation Plan (the "Incentive Compensation Plan") which directly links
bonuses to the financial performance of the Company.
The Compensation Committee utilized the services of L.R. Webber
Associates, Inc. ("Webber"), a regionally recognized independent compensation
consulting company, to review and to make recommendations regarding the
competitiveness and effectiveness of the Company's executive compensation
program for the 2005 fiscal year. As part of that review, Webber was requested
to review executive compensation programs of banking organizations that shared
one or more common traits with the Company (such as asset size and geographic
location). The information and recommendations of Webber have been utilized by
the Compensation Committee and the Board of Directors.
15
Salaries
The determination of the base salaries of the executive officers of the
Company is based upon an overall evaluation of a number of factors, including a
subjective evaluation of individual performance, contributions to the Company
and its subsidiaries, analysis of how the Company's and its subsidiaries'
compensation of its employees compares to compensation of individuals holding
comparable positions with companies of similar asset size and complexity of
operations. Peer group compensation was the primary factor in setting of the
salary of the executive officers of the Company for the 2005 fiscal year.
The salary paid to Mr. Joyce for services rendered in his capacities as
President and Chief Executive Officer of the Company during the 2005 fiscal year
represented an increase of 7.7% (as a result that the 10% increase was not in
effect until April 1, 2005) over the salary paid with respect to the 2004 fiscal
year. Mr. Joyce did not receive a salary for services rendered in his capacity
as Chairman and Chief Executive Officer of RDSI.
The salary paid to Mr. Constien for services rendered in his capacities
as President and Chief Executive Officer of State Bank during the 2005 fiscal
year represented no increase over the salary paid with respect to the 2004
fiscal year. Mr. Constien was named Chairman, President and CEO of RFS in June
2005, and his base salary was reduced 9.7% from the base salary he received as
President and Chief Executive Officer of State Bank in the 2004 fiscal year.
The salary paid to Mr. Adams for services rendered in his capacities of
Executive Vice President and Chief Financial Officer of the Company during the
2005 fiscal year represented no increase over the salary paid with respect to
the 2004 fiscal year. Mr. Adams resigned as Executive Vice President and Chief
Financial Officer of the Company on November 30, 2005.
The salary paid to Mr. Thiemann for services rendered in his capacities
of Executive Vice President and Chief Operating Officer of State Bank during the
2005 fiscal year represented no increase over the salary paid with respect to
the 2004 fiscal year. Mr. Thiemann was named President and Chief Executive
Officer of The Exchange Bank in December 2005, and he was awarded a base salary
increase of 2.5% in connection with his new position. Mr. Thiemann did not
receive a salary for services rendered in his capacity as President and Chief
Executive Officer of RFCBC.
Mr. Sinn was promoted to Executive Vice President and Chief Financial
Officer of the Company in December 2005. He was awarded a base salary increase
of 39.4% in connection with his promotion.
Mr. Sewell was named Executive Vice President and Chief Operating
Officer of State Bank in June 2005. The salary paid to Mr. Sewell for services
rendered in his capacities of Executive Vice President and Chief Operating
Officer of State Bank compared to the salary paid to Mr. Sewell as President of
RFS represented an increase of 15.3%.
Incentive Compensation
The Company has an Incentive and Compensation Plan, linking executive
officers' incentive compensation directly to the Company's performance. The
Incentive Compensation Plan increases the "at-risk" portion of executive officer
total compensation by directly linking a percentage of executive officers' total
compensation to the Company's performance and, thereby, to shareholder value.
In 2005, for Messrs. Joyce, Constien, Adams and Thiemann to receive
bonus payouts under the Incentive Compensation Plan, the Company had to meet or
exceed its budget and State Bank, RDSI and
16
RFS had to obtain a "Satisfactory" rating or better on regulatory examinations
and significant audits. In 2005, for Mr. Sinn to receive a bonus payout under
the Incentive Compensation Plan, State Bank had to meet or exceed its budget and
obtain a "Satisfactory" rating or better on regulatory examinations and
significant audits. In 2005, for Mr. Sewell to receive a bonus payout under the
Incentive Compensation Plan, RFS had to meet or exceed its budget and obtain a
"Satisfactory" rating or better on regulatory examinations and significant
audits.
Messrs. Joyce, Constien, Adams, Sinn and Thiemann received no bonuses
under the Incentive Compensation Plan for fiscal year 2005 due to not meeting or
exceeding their respective budgets.
With respect to the 2005 fiscal year, Mr. Sewell received a $16,350
bonus payout under the Incentive Compensation Plan rendered in his capacities as
President of RFS.
The Compensation Committee extensively reviewed and discussed the
recommendations provided by Webber regarding the competitiveness and
effectiveness of the Company's executive compensation program for the 2005
fiscal year. Due to Mr. Joyce's loyalty and his performance through the
Company's regulatory issues as well as the fact that Mr. Joyce's base salary had
not been increased since August 2002 when he was appointed CEO of the Company,
the Committee approved a 10% increase to Mr. Joyce's base salary.
Stock Option Plan
The Company believes that it is also important to provide
compensation which serves to be an incentive for long-term corporate financial
performance. In that regard, the Board of Directors of the Company adopted, and
the shareholders of the Company approved, the Rurban Financial Corp. Stock
Option Plan (the "Stock Option Plan"). Under the Stock Option Plan, directors,
officers and other key employees of the Company and its subsidiaries have been
selected by the Compensation Committee to receive awards. The Stock Option Plan
authorizes the granting of (i) incentive stock options (as defined in Section
422 of the Internal Revenue Code), (ii) non-qualified stock options and (iii)
stock appreciation rights. The purpose of the Stock Option Plan is to encourage
participants to acquire or increase and retain a financial interest in the
Company, to remain in the service of the Company, and to put forth maximum
efforts for the success of the Company, and to enable the Company and its
subsidiaries to compete effectively for the services of potential employees and
directors by furnishing an additional incentive to join the service of the
Company and its subsidiaries. Each option awarded under the Stock Option Plan
has an exercise price equal to 100% of the fair market value of the Company's
common shares on the date of grant. If there is no appreciation in the market
value of the common shares, the options will be valueless. Thus, in contrast to
the base salary and incentive components of compensation, option grants are tied
directly to the price performance of the Company's common shares.
During the 2005 fiscal year, the Compensation Committee administered
the Stock Option Plan and approved the grant of options covering an aggregate of
54,000 common shares to the directors, executive officers and three key
employees of the Company and its subsidiaries. The options awarded to the
Company's executive officers are described in table under "GRANTS OF OPTIONS."
In 2003, the Compensation Committee approved cash bonuses for Mr.
Joyce, Mr. Adams, Mr. Thiemann and Mr. Constien, none of which were paid out nor
accrued for. In 2005, Mr. Webber discussed extensively with the Committee a
proposal to issue, in tandem, non-qualified stock options and stock appreciation
rights in lieu of the bonuses since they were never paid out. The option price
would be in effect at the close of business on the date of approval by the Board
of Directors. The Compensation Committee approved the issuing of the options and
SARS in lieu of paying the cash bonuses. Mr.
17
Webber supplied the Board of Directors with a letter stating his view on the
fairness and appropriateness of this executive bonus payment approach.
Rurban ESOP and Savings Plan
The officers and employees of the Company and its subsidiaries are
encouraged to maintain a significant long-term stock ownership position with the
Company. This has been fostered not only through the grant of options under the
Stock Option Plan, but also by the Rurban ESOP and Savings Plan. The Rurban ESOP
and Savings Plan has two main components - an employee stock ownership component
and a 401(k) component. With respect to the employee stock ownership component,
each year the Company and its subsidiaries may contribute an amount in cash
and/or Company common shares determined by the Compensation Committee to the
Rurban ESOP and Savings Plan. The contribution is allocated to the accounts of
participants pro rata based on the amount of each participant's compensation.
The Company and its subsidiaries contributed an aggregate amount of $445,000 to
the Rurban ESOP and Savings Plan with respect to the 2005 fiscal year. Each of
Messrs. Joyce, Constien, Adams, Sinn, Sewell and Thiemann participates in the
Rurban ESOP and Savings Plan. As of the date of this Proxy Statement, no
determination has been made as to the amount to be allocated to the accounts of
Messrs. Joyce, Constien, Sinn, Sewell and Thiemann under the Rurban ESOP and
Savings Plan with respect to the 2005 fiscal year. Under the Rurban ESOP and
Savings Plan, Mr. Adams was not eligible for an allocation with respect to the
2005 fiscal year due to his resignation prior to December 31, 2005.
With respect to the 401(k) component of the Rurban ESOP and Savings
Plan, three types of contributions are contemplated: (1) pre-tax elective
deferral contributions by each participant of a percentage of his or her annual
compensation; (2) matching contributions made by the employer in cash in an
amount determined by the Board of Directors, upon recommendation of the
Compensation Committee; and (3) qualified rollover contributions by a
participant from another qualified plan. The Board of Directors, upon
recommendation of the Compensation Committee has determined that for the 2005
fiscal year, the amount of the matching contributions to be made on behalf of
each participant in the Rurban ESOP and Savings Plan is 50% of the amount of
such participant's pre-tax elective deferral contributions, but only upon that
portion of his or her pre-tax elective deferral contributions which did not
exceed 6% of his or her annual compensation. Matching contributions in the
amount of $6,231, $4,631, $4,663, $2,458, $3,209 and $4,749 were made on behalf
of Messrs. Joyce, Constien, Adams, Sinn, Sewell and Thiemann, respectively, to
match their respective 2005 pre-tax elective deferral contributions made to the
Rurban ESOP and Savings Plan.
Rurban Employee Stock Purchase Plan
The Company has a qualified Rurban Financial Corp. Employee Stock
Purchase Plan (the "ESPP"). The purpose of the ESPP Plan is to provide employees
of the Company and its subsidiaries with a convenient means by which they may
purchase common shares of the Company on the open market.
All employees of the Company and its subsidiaries are eligible to
participate in the ESPP as of the first day of the month coincident with or
immediately following the completion of three (3) months of employment with the
Company or one of its subsidiaries, and will be a Participant as of that date.
If a participant elects to participate in the ESPP, the participant authorizes
the Company to deduct from his or her compensation for each payroll period the
amount so elected on the applicable enrollment form. All payroll deductions
under the ESPP are made on an after-tax basis. All payroll deductions made under
the ESPP are forwarded by the Company to its agent. When the agent receives the
payroll deductions, as
18
soon as practicable, the agent purchases on the open market such number of
common shares as may be purchased with such payroll deductions. In addition, the
agent will apply all cash dividends, if any, paid with respect to common shares
held in a participant's account to the purchase on the open market of additional
common shares.
Submitted by the Compensation Committee of the Company's Board of Directors:
John Fahl, Chairman, John R. Compo, Steven D. VanDemark & J. Michael Walz, D.D.S
19
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the last three years, the cash
compensation paid by the Company and its subsidiaries, as well as certain other
compensation paid or earned for those years, to or for the account of each
individual who served as Chief Executive Officer of the Company and the three
other executive officers of the Company during the 2005 fiscal year whose total
annual salary and bonus exceeded $100,000. Pursuant to SEC regulations,
information is also provided for Mr. Adams because he would have been among the
Company's highest paid executive officers but for the fact that he resigned from
the Company prior to the end of the 2005 fiscal year. Dollar amounts have been
rounded up to the nearest whole dollar.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation Awards
---------------------------- -------------------
Name and Common Shares All Other
Principal Position Year Salary($) Bonus($) Underlying Options(#) Compensation ($)
------------------ ---- --------- -------- --------------------- ----------------
Kenneth A. Joyce, President 2005 $258,462 $0 20,000 $17,561 (1)
and CEO of the Company and 2004 $240,000 $0 20,000 $21,713 (1)
Chairman and CEO of RDSI 2003 $240,000 $0 0 $18,844 (1)
Robert W. Constien, 2005 $154,356 $0 3,000 $11,944 (2)
Chairman, President and CEO 2004 $170,856 $0 10,000 $21,564 (2)
of RFS 2003 $169,676 $0 0 $19,422 (2)
(Resigned 01/03/06)
James E. Adams, Executive 2005 $147,734 $0 3,000 $15,069 (3)
Vice President and Chief 2004 $150,000 -- 10,000 $70,951 (3)
Financial Officer of the 2003 $115,385 -- -- $24,152 (3)
Company (Resigned 11/30/05)
Henry R. Thiemann, 2005 $158,303 $0 3,000 $47,407 (4)
President and CEO of The 2004 $154,500 $0 10,000 $18,254 (4)
Exchange Bank since 2003 $160,729 $0 0 $21,030 (4)
December 2005; President
and CEO of RFCBC
Jeffrey D. Sewell, 2005 $116,036 $16,350 0 $ 9,787 (6)
Executive Vice President -- -- -- -- --
and COO of State Bank -- -- -- -- --
(1) "All Other Compensation" for fiscal years 2005, 2004 and 2003 includes: (i)
a contribution of $6,231, $6,892 and $5,615, respectively, to the Rurban
ESOP and Savings Plan on behalf of Mr. Joyce to match 2005, 2004 and 2003
pre-tax elective deferral contributions (included under "Salary") made by
him to the Rurban ESOP and Savings Plan, (ii) $6,098, $3,369 and $1,576
received by Mr. Joyce from the Company during fiscal years 2005, 2004 and
2003, respectively, as an automobile usage/allowance and (iii) $5,232 of
taxable income recognized on split-dollar
20
Bank Owned Life Insurance ("BOLI") for fiscal year 2005 and $943 and $1,290
for 2004 and 2003, respectively, which represent the premiums paid on Mr.
Joyce's behalf for a group term life insurance policy which has a death
benefit of $50,000 for fiscal year 2004 and had a death benefit equal to
200% of Mr. Joyce's annual salary less $50,000 for fiscal year 2003. The
amounts allocated to the account of Mr. Joyce under the ESOP for 2004 and
2003 were $10,509 and $10,363, respectively. The amount to be allocated to
the account of Mr. Joyce under the ESOP with respect to fiscal year 2005
has not been determined as of the date of this Proxy Statement.
(2) Mr. Constien resigned as Chairman, President and CEO of RFS on January 3,
2006. "All Other Compensation" for 2005, 2004 and 2003 includes (i)
contributions of $4,631, $5,127 and $5,091 respectively, to the Rurban ESOP
and Savings Plan on behalf of Mr. Constien to match 2005, 2004 and 2003
pre-tax elective deferral contributions (included under "Salary") made by
him to the Rurban ESOP and Savings Plan, (ii) $5,848, $7,087 and $4,972
received by Mr. Constien from the Company during fiscal years 2005, 2004
and 2003, respectively, as an automobile usage/allowance and (iii) $1,466
of taxable income recognized on split-dollar BOLI for fiscal year 2005 and
payments of $588 and $262 for 2004 and 2003, respectively, which represent
the premiums paid on Mr. Constien's behalf for a group term life insurance
policy which has a death benefit of $50,000. The amounts allocated to the
account of Mr. Constien under the ESOP for 2004 and 2003 were $8,761 and
$9,064, respectively. The amount to be allocated to the account of Mr.
Constien under the ESOP with respect to fiscal year 2005 has not been
determined as of the date of this Proxy Statement.
(3) Mr. Adams resigned as Executive Vice President and Chief Financial Officer
of the Company effective November 30, 2005. "All Other Compensation" for
2005 includes (i) contributions of $4,663, $4,752 and $3,646, respectively,
to the Rurban ESOP and Savings Plan on behalf of Mr. Adams to match 2005,
2004 and 2003 pre-tax elective deferral contributions (included under
"Salary") made by him to the Rurban ESOP and Savings Plan, (ii) $7,700,
$8,400 and $6,150 received by Mr. Adams from the Company during fiscal
years 2005, 2004 and 2003, respectively, as an automobile usage/allowance,
(iii) $48,232 and $7,086 received by Mr. Adams for reimbursement of moving
expenses during fiscal years 2004 and 2003, respectively, and (iv) $2,706
of taxable income recognized on split-dollar BOLI for fiscal year 2005 and
payments of $943 and $605 for 2004 and 2003, respectively, which represent
the premiums paid on Mr. Adam's behalf for a group term life insurance
policy which has a death benefit of $50,000 for fiscal year 2004 and had a
death benefit equal to 200% of Mr. Adam's annual salary less $50,000 for
fiscal year 2003. The amount allocated to the account of Mr. Adams under
the ESOP for 2004 and 2003 was $8,120 and $6,664, respectively. The amount
to be allocated to the account of Mr. Adams under the ESOP with respect to
fiscal year 2005 has not been determined as of the date of this Proxy
Statement.
(4) "All Other Compensation" for 2005, 2004 and 2003 includes (i) contributions
of $4,749, $4,635 and $4,412, respectively, to the Rurban ESOP and Savings
Plan on behalf of Mr. Thiemann to match 2005, 2004 and 2003 pre-tax
elective deferral contributions (included under "Salary") made by him to
the Rurban ESOP and Savings Plan, (ii) $3,859, $4,756 and $7,000 received
by Mr. Thiemann from the Company during fiscal years 2005, 2004 and 2003,
respectively, as an automobile usage/allowance and (iii) $2,596 of taxable
income recognized on split-dollar BOLI for fiscal year 2005 and payments of
$1,447 and $1,290 for 2004 and 2003, respectively, which represent the
premiums paid on Mr. Thiemann's behalf for a group term life insurance
policy which has a death benefit of $50,000 for fiscal year 2004 and had a
death benefit equal to 200% of Mr. Thiemann's annual salary less $50,000
for fiscal year 2003. The amounts allocated to the
21
account of Mr. Thiemann under the ESOP for 2004 and 2003 were $7,920 and
$8,328 respectively. The amount to be allocated to the account of Mr.
Thiemann under the ESOP with respect to fiscal year 2005 has not been
determined as of the date of this Proxy Statement.
(5) "All Other Compensation" for 2005 includes (i) contributions of $2,458 to
the Rurban ESOP and Savings Plan on behalf of Mr. Sinn to match 2005
pre-tax elective deferral contributions (included under "Salary") made by
him to the Rurban ESOP and Savings Plan, (ii) $700 received by Mr. Sinn
from the Company during fiscal year 2005 as an automobile usage/allowance
and (iii) $148 of taxable income recognized on split-dollar BOLI for fiscal
year 2005 and a payment of $121, which represent the premium paid on Mr.
Sinn's behalf for a group term life insurance policy which has a death
benefit of twice his salary for fiscal year 2005. The amount to be
allocated to the account of Mr. Sinn under the ESOP with respect to fiscal
year 2005 has not been determined as of the date of this Proxy Statement.
(6) "All Other Compensation" for 2005 includes (i) contributions of $3,209 to
the Rurban ESOP and Savings Plan on behalf of Mr. Sewell to match 2005
pre-tax elective deferral contributions (included under "Salary") made by
him to the Rurban ESOP and Savings Plan, (ii) $6,000 received by Mr. Sewell
from the Company during fiscal year 2005 as an automobile usage/allowance
and (iii) $578 of taxable income recognized on split-dollar BOLI for fiscal
year 2005. The amount to be allocated to the account of Mr. Sewell under
the ESOP with respect to fiscal year 2005 has not been determined as of the
date of this Proxy Statement.
Grants of Options
The following table summarizes information concerning individual grants
of options and tandem stock appreciation rights made during the 2005 fiscal year
to each of the individuals named in the Summary Compensation Table. Mr. Sewell
was not granted any stock options or stock appreciation rights during the 2005
fiscal year.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable
% of Total Value at Assumed
Number of Original Annual Rates of Share
Common Options/SARs Price Appreciation
Shares Granted to Exercise or for Option Term (1)
Name Underlying Employees in Base Price Expiration -------------------
---- Options/SARs Fiscal Year ($/Share) Date 5% ($) 10% ($)
Granted (#) ----------- --------- ---- ------ -------
-----------
Kenneth A. Joyce (2) 20,000 37.0% $14.15 03/16/15 $177,977 $451,029
Henry R. Thiemann (2) 3,000 5.6% $14.15 03/16/15 $26,697 $67,654
James E. Adams (2) (3) 3,000 5.6% $14.15 03/16/15 $26,697 $67,654
Robert W. Constien (2)(3) 3,000 5.6% $14.15 03/16/15 $26,697 $67,654
(1) The dollar amounts reflected in this table are the result of
calculations at the 5% and 10% annual appreciation rates set by the SEC for
illustrative purposes, and assume the options are held until their respective
expiration dates. The dollar amounts are rounded down to the nearest whole
dollar. The dollar amounts are not intended to forecast future financial
performance or possible future appreciation in the price of the Company's common
shares. Shareholders are therefore cautioned against drawing any conclusions
from the appreciation data shown, aside from the fact that optionees will only
realize value from the option
22
grants shown if the price of the Company's common shares appreciates, which
benefits all shareholders of the Company commensurately.
(2) Messrs. Joyce, Thiemann, Adams and Constien were awarded SARs in
connection with the grant of the same number of non-qualified stock options. The
stock options and the SARs vested immediately upon grant. Since the SAR awards
are parallel to a non-qualified stock option grant, the exercise of all or a
portion of the non-qualified stock option will result in an exercise of the same
proportion of SAR's granted. A SAR can only be exercisable in conjunction with
the exercise of a parallel non-qualified stock option. The SAR notional value on
each grant is $14.15, which was the closing price of the Company's common shares
on the grant date, March 16, 2005. Each SAR entitles the optionee to the excess
of the Fair Market Value of a common share of the Company on the exercise date
over the Fair Market Value of a common share of the Company on the date the SAR
was granted. The total appreciation available to the optionee from any exercise
of a SAR is equal to the number of SAR's being exercised times the amount of
appreciation per SAR. The total appreciation available to the optionee from the
exercise of a SAR will be paid in a single lump sum payment in cash. The
Compensation Committee will determine the appropriate arrangements for the
satisfaction by the Company and the optionee of all federal, state, local or
other income, excise or employment taxes or tax withholding requirements
applicable to the exercise of the SARs.
(3) Messrs. Adams and Constien forfeited their options upon their
resignations.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to options
exercised during, and unexercised options held as of the end of, the 2005 fiscal
year by each of the executive officers named in the Summary Compensation Table.
Dollar amounts have been rounded up to the nearest whole dollar.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Value of Unexercised
Number of Common Shares In-the-Money
Underlying Unexercised Options/SARs at
Options/SARs at Fiscal Year-End (#) Fiscal Year-End($)(1)
Common Shares ----------------------------------- ---------------------
Acquired on Value
Exercise Realized($) Exercisable Unexercisable Exercisable Unexercisable
-------- ----------- ----------- ------------- ----------- -------------
Kenneth A. Joyce 0 $0 53,519 0 $0 $0
Robert W. Constien 0 $0 0 0 $0 $0
James E. Adams 0 $0 0 0 $0 $0
Henry R. Thiemann 0 $0 19,077 0 $0 $0
Duane L. Sinn 0 $0 4,794 0 $0 $0
Jeffrey D. Sewell 0 $0 9,589 0 $0 $0
(1) "Value of Unexercised In-the-Money Options at FY-End" is based
upon the fair market value of the Company's common shares on
December 31, 2005 ($11.78) less the exercise price of the
options at the end of the 2005 fiscal year.
23
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENTS
Effective March 1, 2006, the Company entered into Supplemental Executive
Retirement Plan Agreements with Kenneth A. Joyce, Henry R. Thiemann, Duane L.
Sinn, Mark A. Klein and Jeffrey D. Sewell (the "SERP Agreements"). The SERP
Agreements supersede the Executive Salary Continuation Agreements previously
entered into by the Company and Messrs. Joyce and Thiemann.
Under the SERP Agreements, if the executive officer remains in the continuous
employment of the Company, he must retire on the first December 31st after his
65th birthday (62nd birthday for Mr. Joyce), unless the Board of Directors
shortens or extends the employment period. Beginning on the first day of the
month following retirement, the executive officer will receive an annual benefit
equal to 20% of his "Annual Direct Salary" (25% of Annual Direct Salary for Mr.
Joyce) in equal monthly installments of 1/12th of the annual benefit for a
period of 180 months. "Annual Direct Salary" means the highest base salary paid
to the executive officer for any calendar month during the 36-month period
preceding the termination of his employment, multiplied by 12.
If there is a "change in control" of the Company (as defined in the SERP
Agreements) the executive officer will receive an annual benefit equal to 20%
(25% for Mr. Joyce) of his Annual Direct Salary calculated as of the date of the
change in control or the date is employment is terminated, whichever is higher.
The annual benefit will be paid in equal monthly installments of 1/12th of the
annual benefit for a period of 180 months. If the compensation provided to an
executive officer under his SERP Agreement in connection with a change in
control would constitute a "parachute payment" within the meaning of Section
280G of the Internal Revenue Code, then the relevant portions of any separate
Change in Control Agreement between the Company and the executive officer would
apply. If the Company and the executive officer are not parties to a separate
Change in Control Agreement, the amount of compensation payable under the
executive officer's SERP Agreement will be reduced to the extent necessary to
avoid excise taxes under Section 4999 of the Internal Revenue Code.
If an executive officer voluntarily terminates his employment prior to age 65
(age 62 for Mr. Joyce), his SERP Agreement will terminate immediately and the
Company will pay the executive officer early retirement compensation equal to:
- 10% (15% for Mr. Joyce and 5% for Mr. Sewell) of the executive
officer's Annual Direct Salary if the executive officer terminates
employment between age 55 and 60;
- 15% (20% for Mr. Joyce and 10% for Mr. Sewell) of the executive
officer's Annual Direct Salary if the executive officer terminates
employment between age 60 and 65; or
- 20% (25% for Mr. Joyce and 15% for Mr. Sewell) of the executive
officer's Annual Direct Salary if the executive officer terminates
employment at age 65 (age 62 for Mr. Joyce).
The early retirement compensation described above will be paid beginning on the
first day of the month following early retirement in equal monthly installments
of 1/12th of the annual benefit for a period of 180 months. If the executive
officer dies at any time prior to age 65 (age 62 for Mr. Joyce) while employed
by the Company, his death will be treated as an early retirement and his
designated beneficiary or estate will receive early retirement compensation as
described above. If the executive officer voluntarily terminates his employment
prior to age 55 or if the executive officer is discharged for "Cause" (as
defined in the SERP Agreements) he will not be entitled to any compensation
under his SERP Agreement.
24
If an executive officer dies or becomes permanently disabled during his
employment, his SERP Agreement will terminate and the Company will have no
further obligations to the executive officer under his SERP Agreement. However,
any compensation that becomes payable to an executive officer under his SERP
Agreement prior to his death or permanent disability (i.e., compensation arising
from retirement, early retirement or a change in control) will continue to be
paid to the executive officer or his designated beneficiary or estate, as
appropriate.
The SERP Agreements do not require the executive officers to mitigate the amount
of any compensation payable to them under the SERP Agreements by seeking other
employment or otherwise. The compensation payable to the executive officers
under the SERP Agreements will not be reduced by any other compensation or
benefits the executive officers earn or become entitled to receive after the
termination of their employment with the Company and its subsidiaries.
During the term of the SERP Agreements and for a period of two years thereafter,
the executive officers are prohibited from:
- providing financial or executive assistance to any person or entity
located within 50 miles of the Company's main office in Defiance,
Ohio and engaged in the banking or financial services industry or
any other activity engaged in by the Company or its subsidiaries at
the beginning of the non-competition period;
- directly or indirectly contacting, soliciting or inducing any of
the customers or referral sources of the Company and its
subsidiaries (who were customers or referral sources during the
executive officer's employment with the Company) to become a
customer or referral source of another company; and
- directly or indirectly contacting, soliciting or inducing any of
the employees of the Company and its subsidiaries (who were
employees during the executive officer's employment) to terminate
their employment with the Company or its subsidiaries or to seek,
obtain or accept employment with another company.
The SERP Agreements also prohibit the executive officers from using or
disclosing any material confidential information of the Company and its
subsidiaries to any person other than an employee of the Company or its
subsidiaries or a person to whom the disclosure is reasonably necessary or
appropriate in connection with the executive officer's duties to the Company and
its subsidiaries.
In the event of a dispute between the Company and the executive officer
regarding a SERP Agreement, the parties will submit the dispute to binding
arbitration. The Company and its subsidiaries will bear all costs associated
with any disputes arising under the SERP Agreements, including reasonable
accounting and legal fees incurred by the executive officer.
CHANGE IN CONTROL AGREEMENTS
Effective March 1, 2006, the Company entered into new Change in Control
Agreements with Henry R. Thiemann, Duane L. Sinn, Mark A. Klein and Jeffrey D.
Sewell (the "Change in Control Agreements"). These Change in Control Agreements
supersede the change in control agreements previously entered into by the
Company and Messrs. Thiemann and Sinn.
The term of each Change in Control Agreement is March 1, 2006 through March 1,
2008 (18 months for Mr. Sewell). Each Change in Control Agreement will renew
automatically for an additional year unless
25
the Company notifies the executive officer at least 90 days before the end of
the then current term that the Company does not wish to renew the Change in
Control Agreement. The Company is prohibited from delivering such notice during
the "Protection Period" and each Change in Control Agreement will remain in
effect throughout any Protection Period. The Change in Control Agreements define
the "Protection Period" as the period beginning on the first date the Board of
Directors of the Company learns of an event that would result in a "change in
control" if completed and ending on the latest of:
- the last day of the 12-month period beginning after the change in
control;
- 60 days after the date the executive officer learns of an event
occurring during the Protection Period which falls within the
definition of "Good Reason" and which the Company or its successor
concealed; or
- 60 days after the conclusion of an unsuccessful attempt to
terminate the executive officer for "Cause" (as defined in the
Change in Control Agreements).
Each Change in Control Agreement will terminate on the earliest of the following
events:
- the executive officer's employment is terminated before the
beginning of a Protection Period;
- the executive officer is reassigned before the beginning of a
Protection Period to a more junior position;
- the executive officer agrees to terminate his Change in Control
Agreement; or
- all payments due to the executive officer under the Change in
Control Agreement have been paid.
A "change in control" is defined by the Change in Control Agreements as:
- any transaction that would be required to be reported in a proxy
statement sent to the Company's shareholders;
- a merger or consolidation of the Company or the purchase of all or
substantially all of the Company's assets by another person or
group, in each case, resulting in less than a majority of the
successor entity's outstanding voting stock being owned immediately
after the transaction by the holders of the Company's voting stock
before the transaction;
- any person becoming a "beneficial owner" of securities representing
50% or more of the combined voting power of the Company eligible to
vote for the election of the Company's Board of Directors;
- any person other than the Company, the executive officer or the
Rurban ESOP and Savings Plan becoming the beneficial owner of
securities representing 25% or more of the combined voting power of
the Company (disregarding any securities which were not acquired
for the purpose of changing or influencing control of the Company);
- individuals who constitute the Company's Board of Directors on
March 1, 2006 ceasing for any reason to constitute at least a
majority of the members of the Company's Board of
26
Directors (unless the new director were approved by the vote of at
least 2/3rds of the then incumbent directors); or
- any other change of control of the Company similar in effect to any
of the foregoing.
Under each Change in Control Agreement, (1) if an executive officer is
terminated by the Company or its successor in connection with a "change in
control" of the Company (other than termination of employment for "Cause" as
defined in the Change of Control Agreements) during the Protection Period or (2)
if the executive officer terminates his employment for "Good Reason" during the
Protection Period, the Company or its successor will:
- pay the executive officer a lump sum cash payment equal to 2 times
(1.5 times for Mr. Sewell) the executive officer's Annual Direct
Salary (i.e., the highest base salary paid to the executive officer
for any calendar month during the 36-month period preceding the
termination of his employment, multiplied by 12);
- provide the executive officer and his family (if the executive
officer elected family coverage prior to the termination of his
employment) with continued health care, life insurance and
disability insurance coverage without cost to the executive for a
period of two years, at the same level and subject to the same
terms that were in effect on the first day of the Protection
Period; and
- any other payments or benefits to which the executive officer is
entitled under the terms of any other agreement, arrangement, plan
or program in which he participates.
If the Company or its successor is unable to provide the health care, life
insurance and disability insurance coverage described above through an insured
arrangement for active employees and with the same tax consequences available to
active employees, the Company or its successor will pay the executive officer an
additional amount of cash equal to the executive officer's cost of procuring
equivalent coverage. The amount of this cash payment will be "grossed up" to
ensure that the executive officer receives enough cash to pay the cost of
procuring equivalent coverage after payment of all applicable federal, state and
local taxes.
If the compensation provided to an executive officer under his Change in Control
Agreement would constitute a "parachute payment" within the meaning of Section
280G of the Internal Revenue Code, then the amount of compensation payable under
the executive officer's Change in Control Agreement will be reduced to the
extent necessary to avoid excise taxes under Section 4999 of the Internal
Revenue Code.
Under each Change in Control Agreement, if an executive officer's employment is
terminated for "Cause" (as defined in the Change in Control Agreements) or if
the executive officer voluntarily terminates his employment without "Good
Reason" (as defined in the Change in Control Agreements), the Change in Control
Agreement will terminate immediately and the executive officer will not be
entitled to any compensation or benefits other than salary accrued through the
date his employment terminated and benefits to which the executive officer is
entitled under the terms of the Company's (or any successor entity's) benefit
plans.
If an executive officer dies or becomes permanently disabled during his
employment, his Change in Control Agreement will terminate and the Company will
have no further obligations to the executive officer under his Change in Control
Agreement. However, any compensation that becomes payable to an
27
executive officer under his Change in Control Agreement prior to his death or
permanent disability will continue to be paid to the executive officer or his
designated beneficiary or estate, as appropriate.
The Change in Control Agreements do not require the executive officers to
mitigate the amount of any compensation payable to them under the Change in
Control Agreements by seeking other employment or otherwise. The compensation
payable to the executive officers under the Change in Control Agreements will
not be reduced by any other compensation or benefits the executive officers earn
or become entitled to receive after the termination of their employment with the
Company or its successor and their subsidiaries.
If a change in control occurs and the executive officer receives payments under
his Change in Control Agreement, the executive officer will be prohibited from
engaging the in following activities for two years following the termination of
the executive officer's employment with the Company or its successor:
- providing financial or executive assistance to any person or entity
located within 50 miles of the Company's main office in Defiance,
Ohio and engaged in the banking or financial services industry or
any other activity engaged in by the Company or its subsidiaries on
the date of the change in control;
- directly or indirectly contacting, soliciting or inducing any of
the customers or referral sources of the Company and its
subsidiaries (who were customers or referral sources during the
executive officer's employment) to become a customer or referral
source of another company; and
- directly or indirectly soliciting, inducing or encouraging any of
the employees of the Company or its successor and their
subsidiaries (who were employees during the executive officer's
employment) to terminate their employment with the Company or its
successor and their subsidiaries or to seek, obtain or accept
employment with another company.
The Change in Control Agreements also prohibit the executive officers from using
or disclosing any material confidential information of the Company or its
successor and their subsidiaries to any person other than an employee of the
Company or its successor and their subsidiaries or a person to whom the
disclosure is reasonably necessary or appropriate in connection with the
executive officer's duties to the Company or its successor and their
subsidiaries.
In the event of a dispute between the Company and the executive officer
regarding a Change in Control Agreement, the parties will submit the dispute to
binding arbitration. The Company and its subsidiaries will bear all costs
associated with any disputes arising under the Change in Control Agreements,
including reasonable accounting and legal fees incurred by the executive
officer.
EMPLOYMENT AGREEMENT
Effective March 1, 2006, the Company entered into an Employment Agreement with
Kenneth A. Joyce (the "Employment Agreement"). The Employment Agreement
supersedes the Change in Control Agreement previously entered into by the
Company and Mr. Joyce.
Under the Employment Agreement, Mr. Joyce is employed as the Chief Executive
Officer of the Company and will perform any duties assigned to him from time to
time by the Company's Board of Directors. Mr. Joyce must devote his full time
and attention to the Company's business, and he may not
28
engage in any activities which compete with activities of the Company or its
subsidiaries. Mr. Joyce is also prohibited from serving any company which
competes with the Company or its subsidiaries.
Term
The term of the Employment Agreement runs from March 1, 2006 to March 1, 2009,
but the term will be automatically extended to December 31, 2010 unless either
party provides the other party with notice of nonrenewal no later than September
2, 2008.
Compensation
During the term of the Employment Agreement, Mr. Joyce will be paid an annual
base salary of $264,000 or a higher amount set by the Company. Mr. Joyce is also
entitled to:
- receive bonuses from time to time as the Company, in its sole
discretion, deems appropriate;
- receive paid vacation time in accordance with policies established
by the Company's Board of Directors;
- participate any of the Company's employee benefit plans (provided
that the Company may not change any of its employee benefits in any
way that would adversely affect Mr. Joyce, unless the change would
apply to all of the Company's executive officers and would not
affect Mr. Joyce disproportionately); and
- receive prompt reimbursement for all reasonable business expenses
he incurs in accordance with the policies and procedures
established by the Company's Board of Directors.
Termination Resulting from Disability or Death
If Mr. Joyce dies or becomes permanently disabled during his employment, the
Employment Agreement will terminate and the Company will have no further
obligations to Mr. Joyce under the Employment Agreement. However, any
compensation that becomes payable to Mr. Joyce under the Employment Agreement
prior to his death or permanent disability will continue to be paid to Mr. Joyce
or his designated beneficiary or estate, as appropriate.
Termination for "Cause" or Without "Good Reason"
If Mr. Joyce's employment is terminated by the Board of Directors for "Cause" or
by Mr. Joyce without "Good Reason," the Employment Agreement (and all of Mr.
Joyce's rights under the Employment Agreement) will terminate automatically. If
Mr. Joyce's employment is terminated other than for Cause and the Company
subsequently learns that Mr. Joyce actively concealed conduct that would have
entitled the Company to terminate his employment for Cause, the Company may
recover any amounts paid to Mr. Joyce (or his beneficiaries) under the
Employment Agreement in connection with the termination of his employment.
"Cause" is defined in the Employment Agreement to include:
- the willful failure to substantially perform job duties;
- willfully engaging in misconduct injurious to the Company;
29
- dishonesty, insubordination or gross negligence in the performance
of duties;
- breach of a fiduciary duty involving personal gain or profit;
- any violation of any law, rule or regulation governing public
companies, banks or bank officers or any regulatory enforcement
actions issued by a regulatory authority against the executive;
- conduct which brings public discredit to the Company;
- conviction of, or plea of guilty or nolo contendre to, a felony,
crime of falsehood or a crime involving moral turpitude;
- unlawful discrimination or harassment affecting the Company's
employees, customers, business associates or contractors;
- theft or abuse of the Company's property;
- the recommendation of a state or federal bank regulatory authority
to remove the executive from his position with the Company;
- willful failure to follow the good faith lawful instructions of the
Company's Board of Directors;
- material breach by the executive of any contract or agreement with
the Company; or
- unauthorized disclosure of the Company's trade secrets or
confidential information.
Termination by the Company Without "Cause" or by Mr. Joyce for "Good Reason"
If Mr. Joyce's employment is terminated by the Company without Cause or by Mr.
Joyce with "Good Reason" (and such termination does not occur in connection with
a change in control), the Company will:
- pay Mr. Joyce an amount equal to twice his "Agreed Compensation"
(i.e., the sum of (a) the average of Mr. Joyce's annual base salary
for the five calendar years immediately preceding his termination
and (b) the average of Mr. Joyce's annual bonuses for the five
calendar years immediately preceding his termination) in 24 equal
monthly installments;
- provide Mr. Joyce and his family (if he elected family coverage
prior to the termination of his employment) with continued health
care, life insurance and disability insurance coverage without cost
to the executive for a period of one year, at the same level and
subject to the same terms that were in effect at any time during
the two years prior of his termination; and
- pay Mr. Joyce any other payments or benefits to which he is
entitled under the terms of any other agreement, arrangement, plan
or program in which he participates.
30
"Good Reason" is defined in the Employment Agreement to include:
- the assignment of duties and responsibilities inconsistent with Mr.
Joyce's status as Chief Executive Officer;
- requiring Mr. Joyce to move his office more than 50 miles from the
location of the Company's principal office in Defiance, Ohio;
- reducing Mr. Joyce's annual base salary (except for reductions
resulting from a national financial depression or bank emergency
and implemented for all of the Company's senior management);
- materially reducing the employee benefits afforded to Mr. Joyce
(unless the reduction applies to all of the Company's executive
officers);
- the Company's attempt to amend or terminate the Employment
Agreement without Mr. Joyce's consent;
- the failure of any successor of the Company to assume the Company's
obligations under the Employment Agreement; and
- any unsuccessful attempt to terminate Mr. Joyce for Cause.
Termination in Connection With a Change in Control
If, at any time during the period beginning on the date the Board of Directors
first learns of a possible "change in control" and ending one year after the
change in control, Mr. Joyce's employment is terminated (1) by the Company
without Cause or (2) by Mr. Joyce for Good Reason, the Company or its successor
will:
- pay Mr. Joyce a lump sum cash payment 2.99 times his "Agreed
Compensation";
- provide Mr. Joyce and his family (if he elected family coverage
prior to the termination of his employment) with continued health
care, life insurance and disability insurance coverage without cost
to the executive for a period of three years, at the same level and
subject to the same terms that were in effect at any time during
the two years prior of his termination; and
- pay Mr. Joyce any other payments or benefits to which he is
entitled under the terms of any other agreement, arrangement, plan
or program in which he participates.
The Employment Agreement used the same definition of a "change in control"
described above under "CHANGE IN CONTROL AGREEMENTS."
Mr. Joyce will not be entitled to the payments and benefits described above if
he acted in concert with any person or group to effect a change in control
(other than at the direction of the Board of Directors and in his capacity as an
employee of the Company). Also, the Company may not terminate Mr. Joyce's
employment during the period beginning on the date the Company's Board of
Directors first learns of a possible change in control and ending on the date
the change in control occurs.
31
No Mitigation
The Employment Agreement does not require Mr. Joyce to mitigate the amount of
any compensation payable to him by seeking other employment or otherwise. The
compensation payable to Mr. Joyce under the Employment Agreement will not be
reduced by any other compensation or benefits he earns or becomes entitled to
receive after the termination of his employment with the Company or its
successor and their subsidiaries.
Employee Benefits
If the Company or its successor is unable to provide the health care, life
insurance and disability insurance coverage described above through an insured
arrangement for active employees and with the same tax consequences available to
active employees, the Company or its successor will pay Mr. Joyce an additional
amount of cash equal to the executive officer's cost of procuring equivalent
coverage. The amount of this cash payment will be "grossed up" to ensure that
Mr. Joyce receives enough cash to pay the cost of procuring equivalent coverage
after payment of all applicable federal, state and local taxes.
Parachute Payments
If the compensation provided to an executive officer under his Change in Control
Agreement would constitute a "parachute payment" within the meaning of Section
280G of the Internal Revenue Code, then the amount of compensation payable under
the executive officer's Change in Control Agreement will be reduced to the
extent necessary to avoid excise taxes under Section 4999 of the Internal
Revenue Code.
Non-Compete
If Mr. Joyce receives compensation under his Employment Agreement in connection
with the termination of his employment, he will be prohibited from engaging the
in following activities for two years following the termination of his
employment:
- providing financial or executive assistance to any person or
entity located within 50 miles of the Company's main office in
Defiance, Ohio and engaged in the banking or financial services
industry or any other activity engaged in by the Company or its
subsidiaries on the date of the change in control;
- directly or indirectly contacting, soliciting or inducing any of
the customers or referral sources of the Company and its
subsidiaries (who were customers or referral sources during the
executive officer's employment) to become a customer or referral
source of another company; and
- directly or indirectly soliciting, inducing or encouraging any of
the employees of the Company or its successor and their
subsidiaries (who were employees during the executive officer's
employment) to terminate their employment with the Company or its
successor and their subsidiaries or to seek, obtain or accept
employment with another company.
The Employment Agreement also prohibits Mr. Joyce from using or disclosing any
material confidential information of the Company or its successor and their
subsidiaries to any person other than an employee of the Company or its
successor and their subsidiaries or a person to whom the disclosure is
reasonably necessary or appropriate in connection with his duties to the Company
or its successor and their subsidiaries.
32
Disputes
In the event of a dispute between the Company and Mr. Joyce regarding the
Employment Agreement, the parties will submit the dispute to binding
arbitration. The Company and its subsidiaries will bear all costs associated
with any disputes arising under the Employment Agreement, including reasonable
accounting and legal fees incurred by Mr. Joyce.
PERFORMANCE GRAPH
Set forth on the following page is a line graph comparing the yearly
percentage change in the Company's cumulative total shareholder return on its
common shares with an index for the NASDAQ Stock Market (U.S. Companies)
comprised of all domestic common shares traded on the NASDAQ National Market
System and the NASDAQ Small-Cap Market and an index for NASDAQ Bank Stocks
comprised of all depository institutions (SIC Code #602) and holding and other
investment companies (SIC Code #671) that are traded on the NASDAQ National
Market System and the NASDAQ Small-Cap Market ("NASDAQ Bank Stocks") for the
five-year period ended December 31, 2005.
33
[LINE GRAPH]
PERIOD ENDING
------------------------------------------------------------------
INDEX 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05
----- -------- -------- -------- -------- -------- --------
Ruban Financial Corp. 100.00 128.16 88.67 132.33 132.81 114.24
NASDAQ Composite 100.00 79.18 54.44 82.09 89.59 91.54
NASDAQ Bank Index* 100.00 110.07 115.04 149.48 165.91 159.72
* FactSet Research Inc.
The NASDAQ Bank Index* information was received from Andy at NASDAQ on 2/23/06,
rest from SNL
Source: SNL Financial LC, Charlottesville, VA (434) 977-1600
(C) 2006 www.snl.com
34
AUDIT COMMITTEE MATTERS
REPORT OF THE AUDIT COMMITTEE FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005
In accordance with the SEC's rules, the Audit Committee has issued the
following report for the 2005 fiscal year:
Role of the Audit Committee, the Independent Registered Public Accounting Firm
and Management
The Audit Committee assists the Board of Directors in fulfilling its
responsibility for the oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Company. Each member of the
Audit Committee qualifies as independent under Nasdaq Marketplace Rules
4200(a)(15) and 4350(d)(2) as well as under Rule 10A-3 promulgated under the
Exchange Act. The Audit Committee is organized and operates under a written
charter.
During the 2005 fiscal year, the Audit Committee met eight times and
discussed the interim financial and other information contained in each
quarterly earnings release and periodic SEC filings with management and BKD, LLP
("BKD") the independent registered public accounting firm employed by the
Company for the 2005 fiscal year.
Management is responsible for the Company's consolidated financial
statements and the accounting and financial reporting processes of the Company,
including the establishment and maintenance of adequate internal controls over
financial reporting. BKD is responsible for auditing the Company's consolidated
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States) and issuing its report on the
Company's consolidated financial statements.
Review and Discussion with Independent Registered Public Accounting Firm and
Internal Auditors
In discharging its oversight responsibility as to the audit process,
the Audit Committee obtained from BKD a formal written statement describing all
relationships between the Company and BKD that might bear on BKD's independence
consistent with Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, discussed with BKD any relationships or
services that may impact the objectivity and independence of BKD and satisfied
itself as to BKD's independence. The Audit Committee also discussed with
management and BKD the adequacy and effectiveness of the Company's internal
control over financial reporting and related accounting and financial controls,
and the internal audit function's organization, responsibilities, budget and
staffing. The Audit Committee reviewed with both BKD and the internal auditors
their respective audit plans, audit scope and identification of audit risks.
In addition, the Audit Committee discussed and reviewed with BKD all
communications required by the standards of the Public Company Accounting
Oversight Board (United States), including those described in Statement on
Auditing Standards No. 61 and 90, Communication with Audit Committees, and, with
and without management present, discussed and reviewed the results of BKD's
examination of the Company's consolidated financial statements.
The Audit Committee reviewed and discussed the audited consolidated
financial statements of the Company as of and for the fiscal year ended December
31, 2005 with management.
35
Management's Representations and Audit Committee Recommendations
Management has represented to the Audit Committee that the audited
consolidated financial statements as of and for the fiscal year ended December
31, 2005, were prepared in accordance with accounting principles generally
accepted in the United States of America and the Audit Committee has reviewed
and discussed the audited consolidated financial statements with management and
BKD. Based on the Audit Committee's discussions with management and BKD and the
Audit Committee's review of the report of BKD to the Audit Committee, the Audit
Committee recommended to the Board of Directors (and the Board of Directors has
approved) that the audited consolidated financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2005, for filing with the SEC.
Submitted by the Audit Committee of the Company's Board of Directors.
Robert A. Fawcett, Jr., Chairman, Thomas M. Callan, Richard L. Hardgrove and
Rita A. Kissner
PRE-APPROVAL OF SERVICES PERFORMED BY INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Under applicable SEC rules, the Audit Committee is required to
pre-approve the audit and non-audit services performed by the Company's
independent registered public accounting firm in order to assure that they do
not impair the independent registered public accounting firm's independence from
the Company. The SEC's rules specify the types of non-audit services that an
independent registered public accounting firm may not provide to its audit
client and establish the Audit Committee's responsibility for administration of
the engagement of the independent registered public accounting firm.
Accordingly, the Audit Committee pre-approves all audit and permitted non-audit
services proposed to be provided by the Company's independent registered public
accounting firm. The pre-approval of audit and non-audit services and fees of
the independent registered public accounting firm may be documented by a member
of the Audit Committee signing annual or periodic engagement letters that define
in general terms the type of services to be provided and the range of fees that
are considered acceptable for such services, or as otherwise documented in the
minutes of the Audit Committee meetings. The actual compensation paid to the
independent registered public accounting firm for all such pre-approved services
and fees is to be reported to the Audit Committee on at least a quarterly basis.
All services rendered by BKD in fiscal year 2005 were pre-approved by the Audit
Committee.
SERVICES OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 2005
FISCAL YEAR
During the fiscal years ended 2005 and 2004, the Company paid the
following amounts to BKD for audit, audit-related, tax and other services
rendered:
36
2005 2004
---- ----
Audit Fees (1) $ 176,195 $ 131,445
Audit-Related Fees (2) 88,027 40,865
Tax Fees (3) 20,485 19,230
All Other Fees -- --
(1) Audit fees consists of fees for the audit, review of interim
condensed financial statements on Form 10-Q, audit procedures
with respect to acquisitions during the year, and services in
connection with statutory and regulatory filings including
annual reports on Form 10-K and registration statements on
Form S-4.
(2) Audit-related fees consist of assurance and related services
that are reasonably related to the performance of the audit or
review. These services include SAS 70 service auditors report
and consultations concerning financial and reporting matters
related to acquisitions.
(3) Tax return preparation and tax planning.
NOTIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
BKD has been the Company's independent auditor/independent
registered public accounting firm since November 2002. On October 19, 2005, the
Audit Committee selected BKD as the Company's independent registered public
accounting firm for the fiscal year ending December 31, 2006. Representatives of
BKD will be present at the Annual Meeting and will have the opportunity to make
a statement if they desire to do so and will be available to respond to
appropriate questions.
SHAREHOLDER PROPOSALS FOR THE 2007 ANNUAL MEETING
Proposals by shareholders intended to be presented at the 2007
Annual Meeting of Shareholders must be received by the Corporate Secretary of
the Company no later than November 9, 2006, to be eligible for inclusion in the
Company's proxy card, notice of meeting and proxy statement relating to the 2007
Annual Meeting. Upon receipt of a shareholder proposal, the Company will
determine whether or not to include the proposal in the proxy materials in
accordance with the applicable rules and regulations of the SEC. The SEC has
promulgated rules relating to the exercise of discretionary voting authority
under proxies solicited by the Board of Directors. If a shareholder intends to
present a proposal at the 2007 Annual Meeting of Shareholders, and does not
notify the Corporate Secretary of the Company of the proposal by January 23,
2007, the proxies solicited by the Board of Directors for use at the 2007 Annual
Meeting may be voted on the proposal, without discussion of the proposal in the
Company's proxy statement for the 2007 Annual Meeting. In each case, written
notice must be given to the Corporate Secretary of the Company at the following
address: Keeta J. Diller, Corporate Secretary, 401 Clinton Street, Defiance,
Ohio 43512.
Shareholders desiring to nominate candidates for election as directors
at the 2007 Annual Meeting must follow the procedures described in "ELECTION OF
DIRECTORS -- NOMINATING PROCEDURES."
37
ANNUAL REPORT ON FORM 10-K
The Company will provide without charge to any shareholder, on the
written request of such shareholder, a copy of the Company's Annual Report on
Form 10-K required to be filed under the Exchange Act for the Company's fiscal
year ended December 31, 2005. Such written request should be directed to Valda
Colbart, Investor Relations, Rurban Financial Corp., 401 Clinton Street,
Defiance, Ohio 43512.
DELIVERY OF PROXY MATERIALS TO MULTIPLE SHAREHOLDERS
SHARING THE SAME ADDRESS
Annually, the Company provides each registered shareholder at a shared
address, not previously notified, with a separate notice of the Company's
intention to "household" proxy materials. Only one copy of the Company's proxy
statement for the Annual Meeting and Annual Report to Shareholders for the 2005
fiscal year is being delivered to previously notified multiple registered
shareholders who share an address unless the Company has received contrary
instructions from one or more of the shareholders. A separate proxy card and a
separate Notice of Annual Meeting of Shareholders is being included for each
account at the shared address.
Registered shareholders who share an address and would like to receive
a separate Annual Report to Shareholders for the 2005 fiscal year and/or a
separate proxy statement for the Annual Meeting delivered to them, or have
questions regarding the householding process, may contact Valda Colbart,
Investor Relations Officer, by calling 800-273-5820, or forwarding a written
request addressed to Rurban Financial Corp., Attention: Valda Colbart, Investor
Relations Officer, 401 Clinton Street, Defiance Ohio 43512. Promptly upon
request, additional copies of the Annual Report to Shareholders for the 2005
fiscal year and/or a separate proxy statement for the Annual Meeting will be
sent. By contacting Valda Colbart, registered shareholders sharing an address
can also (i) notify the Company that the registered shareholders wish to receive
separate annual reports to shareholders and/or proxy statements in the future or
(ii) request delivery of a single copy of annual reports to shareholders or
proxy statements in the future if registered shareholders at the shared address
are receiving multiple copies.
Beneficial shareholders, who hold common shares through a broker,
financial institution or other record holder, should contact their broker,
financial institution or other record holder for specific information on the
householding process as it applies to their accounts.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of
no other business to be presented for action by the shareholders at the Annual
Meeting other than those discussed in this proxy statement. If any other matter
is properly presented at the Annual Meeting, the persons named as proxies in the
enclosed proxy cards solicited by the Board of Directors may vote the common
shares represented by such proxy cards on such matters in accordance with their
best judgment in light of the conditions then prevailing.
IT IS IMPORTANT THAT PROXIES BE VOTED AND RETURNED PROMPTLY. EVEN IF
YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE FILL IN, DATE, SIGN AND
RETURN THE PROXY PROMPTLY.
March 9, 2006 By Order of the Board of Directors,
/s/ Kenneth A. Joyce
Kenneth A. Joyce
President and Chief Executive Officer
38
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE RURBAN FINANCIAL CORP.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 20, 2006
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder(s) of common shares of Rurban Financial Corp. (the
"Company") hereby constitutes and appoints Kenneth A. Joyce and Duane L. Sinn,
or either of them, the Proxy or Proxies of the undersigned, with full power of
substitution, to attend the Annual Meeting of Shareholders of the Company (the
"Annual Meeting") to be held on Thursday, April 20, 2006, at Eagles Club (First
Floor), 711 W. Second Street, Defiance, Ohio at 10:00 A.M., local time, and any
adjournment(s) thereof, and to vote all of the common shares of the Company
which the undersigned is entitled to vote at such Annual Meeting or at any
adjournment(s) thereof, as follows:
Please be sure to sign and date Date
this Proxy in the box below.
-------------------------------------------------------------------------------
----Shareholder sign above------------------Co-holder (if any) sign above------
With- For All
For hold Except
1. To elect four (4) directors to serve for
terms of three years each: [ ] [ ] [ ]
THOMAS A. BUIS KENNETH A. JOYCE
THOMAS L. SAUER J. MICHAEL WALZ
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK "FOR
ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
--------------------------------------------------------------------------------
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING (NON KNOWN AT THE
TIME OF SOLICITATION OF THIS PROXY) OR ANY ADJOURNMENT(s) THEREOF.
WHERE A CHOICE IS INDICATED, THE COMMON SHARES REPRESENTED BY THIS PROXY, WHEN
PROPERLY EXECUTED, WILL BE VOTED OR NOT VOTED AS SPECIFIED. IF NO CHOICE IS
INDICATED, THE COMMON SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES LISTED IN ITEM NO. 1 AS DIRECTORS OF THE COMPANY. IF
ANY OTHER MATTERS ARE PROPERLY BROUGHT BEFORE THE ANNUAL MEETING OR ANY
ADJOURNMENT(S) THEREOF OR IF A NOMINEE FOR ELECTION AS A DIRECTOR NAMED IN THE
PROXY STATEMENT IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE, THE COMMON
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE PROXIES
ON SUCH MATTERS OR FOR SUCH SUBSTITUTE NOMINEE(S) AS THE DIRECTORS MAY
RECOMMEND.
All proxies previously given or executed by the undersigned are hereby
revoked. The undersigned acknowledges receipt of the accompanying Notice of
Annual Meeting to Shareholders and Proxy Statement for the Annual Meeting and
the Annual Report to Shareholders for the fiscal year ended December 31, 2005.
Please sign exactly as your name appears hereon. When common shares are
registered in two names, both shareholders should sign. When signing as
executor, administrator, trustee, guardian, attorney or agent, please give full
title as such. If the shareholder is a corporation, please sign in full
corporate name by President or other authorized officer. If the shareholder is a
partnership, please sign in partnership name by authorized person. (Please note
any change of address on this proxy.)
--------------------------------------------------------------------------------
/\ DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED. /\
RURBAN FINANCIAL CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF RURBAN
FINANCIAL CORP. IT IS IMPORTANT THAT PROXIES BE VOTED AND RETURNED PROMPTLY.
EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE FILL IN,
DATE, SIGN AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED SELF-ADDRESSED
ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY REVOKE YOUR PROXY AND
VOTE IN PERSON IF YOU WISH TO DO SO.
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
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